Volatility is still elevated in US equity markets. Rising real yields are the big factor there. All signs are that real yields can continue to rise. But going forward, globally, some other issues to consider are household debt and the ECB’s likely regime shift.

Rising inflation expectations are pushing interest rates higher. But Fed moves matter more. If the data continue to show growth in the economy, markets will move toward the Fed and interest rates will rise.

This month, we have seen an unprecedented increase in volatility. When the fundamentals take a knock, that’s when we should worry though. Let’s wait for the CPI next week and revisit this conversation.

Jeremy Grantham discussed his recent US market commentary with Consuelo Mack. The essence of Grantham’s comments were bearish for the US, suggesting investors could expect only a couple of percent real return over the next couple of decades in US equities. He suggests rotating into Emerging Markets.